UNDERSTAND THE FUNDING PICTURE

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Finance for buying a childcare centre is assessed on more than the purchase price.

 

An established centre provides lenders with historical financial performance and operating data. Depending on the lender and transaction, they may consider factors such as revenue, profitability, cash flow, occupancy, staffing costs, lease terms, the buyer's financial position and their experience in operating or managing a childcare business.

 

The total funding requirement may extend beyond the business purchase price to include:

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• working capital for the transition period;

• professional, legal and accounting costs;

• equipment, furniture and technology;

• lease assignment, landlord or bank guarantee requirements;

• repairs, maintenance or refurbishment; and

• additional working capital required to support the business after settlement.

 

The lease can be particularly important when financing a childcare centre. Lenders may consider the remaining lease term, options, rent and other lease obligations when assessing the overall transaction and the security available to support the finance.

 

There are also regulatory considerations when acquiring an established childcare centre. The transfer of a service approval is subject to the applicable regulatory process, and the receiving approved provider's financial capacity and management ability may be considered.

 

The structure of the transaction can also make a significant difference. Buying the operating business, acquiring the property, or purchasing both together can result in very different funding requirements, security structures and lender considerations.

 

Our concise guide explains how lenders may assess the business purchase and how different funding requirements could be structured.

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​​FREQUENTLY ASKED QUESTIONS

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​Can I get finance to buy a childcare centre?

> Yes. Established childcare centres can be considered for business acquisition finance, subject to the lender's assessment of the business, its financial performance and cash flow, the lease, the buyer's financial position and experience, and the overall transaction.

 

What do lenders look at when financing a childcare centre?

> Lenders may consider the centre's historical financial performance, revenue, profitability, cash flow, occupancy, operating costs, lease terms and the buyer's financial position and ability to successfully operate or manage the business.

 

How much buyer contribution do I need to buy a childcare centre?

> There is no single contribution that applies to every acquisition. The amount will depend on factors such as the purchase price, business performance, available security, the lender's policy, the buyer's financial position and the overall strength of the transaction. In some circumstances, additional property security may reduce the amount of cash equity required.